2005 Regular Session
To: Business and Financial Institutions; Appropriations
By: Senator(s) Jackson (11th), Thomas
AN ACT TO CREATE THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS ACT; TO PROVIDE FOR LEGISLATIVE INTENT; TO DEFINE CERTAIN TERMS; TO CREATE THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND; TO PROVIDE FOR THE ADMINISTRATION OF THE FUND; TO PROVIDE FOR THE SELECTION OF COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS; TO PROVIDE FOR PERFORMANCE GOALS AND SANCTIONS; TO PRESCRIBE REPORTING REQUIREMENTS; TO AUTHORIZE THE COMMISSIONER OF BANKING AND CONSUMER FINANCE TO PROMULGATE RULES AND REGULATIONS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known and may be cited as the "Community Development Financial Institutions Act".
SECTION 2. (1) The Legislature hereby finds that credit, banking services and investment capital are vital to the revitalization of communities throughout the state. The Legislature further finds that many communities with the greatest potential for growth and the greatest need for jobs and investment lack access to the services and capital of traditional banking and lending institutions. The Legislature further finds that access to banking services and capital can be improved through a growing network of alternative financial service providers known as community development financial institutions, hereafter referred to as "CDFIS." The Legislature finds that CDFIS are currently providing effective lending and financial services and fulfill a vital role in meeting the needs of Mississippi's low and moderate income communities.
(2) The Legislature finds that the continued growth of CDFIS requires an established support structure in order to build capacity in these institutions. The Legislature further finds that creation of a statewide CDFIS Fund will strengthen these institutions, allowing them to expand their mission of addressing the credit and banking needs of low and moderate income communities in the State of Mississippi.
SECTION 3. As used in this act, the following terms and abbreviations shall have the meanings indicated:
(a) "Administrator" means the administrator of the community development financial institutions fund.
(b) "CDFI" means a community development financial institution which:
(i) Has the primary mission of promoting community development;
(ii) Serves an investment area or targeted population;
(iii) Is principally a financing entity whose predominant activity is providing loans, investments and/or banking services, and development services;
(iv) Maintains, through representation on its governing board or otherwise, accountability to residents of its investment area or targeted population; and
(v) Is not an agency or instrumentality of the united states, any state, or any municipality.
(c) "Commissioner" means the Commissioner of Banking and Consumer Finance.
(d) "Fund" means the community development financial institutions fund.
(e) "Investment area" means a geographic area that:
is economically distressed as defined in the federal CDFI legislation or has significant unmet needs for loans or equity investments or encompasses or is located in a federally designated empowerment zone or enterprise community as established pursuant to Title XIII of the federal Omnibus Budget Reconciliation Act of 1993 (Pub. l. 103-66)
(f) "Low income" means having an income, adjusted for family size, of not more than:
(i) For metropolitan areas, eighty percent (80%) of the area median income; and
(ii) For nonmetropolitan areas, the greater of:
eighty percent (80%) of the area median income; or eighty percent (80%) of the statewide nonmetropolitan area median income.
(g) "Targeted population" means individuals or an identifiable group of individuals who are low income persons or otherwise lack adequate access to loans or equity investments.
SECTION 4. The Community Development Financial Institutions Fund is hereby created. The purpose of the fund is to provide financial and technical assistance to community development financial institutions that make loans and investments and provide development services to specific investment areas or targeted populations.
SECTION 5. (1) The Commissioner of Banking and Consumer Finance shall be responsible for developing policies and priorities for the fund pursuant to the provisions of this act.
(2) The Commissioner of Banking and Consumer Finance shall designate an administrator of the fund. The administrator of the fund shall have experience in community development lending or finance and shall not act as an official of a CDFI. The administrator shall serve at the will and pleasure of the Commissioner of Banking and Consumer Finance.
SECTION 6. An application for assistance shall be submitted in such form and in accordance with such procedures as the governing board shall establish. Applications submitted to the fund shall include:
(a) A three-year business plan;
(b) An analysis of the needs of the investment area or targeted population and a strategy for addressing those needs;
(c) An explanation of proposed activities, consistent with existing economic, community, and housing development plans, adopted by or applicable to an investment area or targeted population;
(d) A description of how the applicant will coordinate with community organizations and financial institutions and leverage private sector investments, including, but not limited to, equity investments, loans, secondary markets or other services to the investment area or targeted populations in the case of an applicant with a prior history of serving investment areas or targeted populations;
(e) In the case of an applicant with a prior history of serving investment area or targeted populations, a demonstration that the applicant:
(i) Has a record of success in serving investment areas or targeted populations; and
(ii) Will expand its operations into a new investment area or will serve a new targeted population, offer more products or services, or increase the volume of its current business;
(f) A description of how the applicant will provide financial services for community businesses that employ or will create jobs for low income persons or to businesses that are owned by low income persons, or enhance the availability of products and services to low income persons; and
(g) Any additional information that the Commissioner of Banking and Consumer Finance shall require.
SECTION 7. In the awarding of assistance, the fund shall select from eligible CDFI applicants based on criteria that shall include:
(a) The likelihood of success of the applicant in meeting the goals of its strategic plan;
(b) The experience and background of the CDFI`s board of directors or management team;
(c) The extent of need for equity investments, loans, and development services within the investment areas or targeted populations;
(d) The extent of economic distress within the investment areas or the extent of need within the targeted populations;
(e) The extent to which the proposed activities will expand economic opportunities within the investment areas or targeted populations;
(f) The extent of support from the investment areas or targeted populations;
(g) The extent of the applicant`s current and planned community involvement;
(h) The extent to which the applicant will increase its resources through coordination with other institutions or participation in a secondary market; and
(i) In the case of an applicant with a prior history of serving investment areas or targeted populations, the extent of success in serving such areas or populations.
SECTION 8. Prior to receiving any assistance under this act, each CDFI selected for assistance shall enter into an agreement with the fund that requires the institution to comply with specified performance goals and to abide by other terms and conditions of such assistance. The format and terms of such agreement shall be established by the governing board; provided, however, that the agreement shall provide that, in the event of fraud, mismanagement or noncompliance with this act or the terms of agreement, the fund may:
(a) Require changes to the performance goals;
(b) Revoke approval of a CDFI application;
(c) Reduce or terminate assistance;
(d) Require repayment of assistance;
(e) Bar an applicant from reapplying for assistance; and
(f) Take such other actions that the fund deems appropriate.
SECTION 9. The fund may provide:
(a) Financial assistance through equity investments, deposits, credit union shares, loans and grants.
(b) Technical assistance and training:
(ii) Through grants; or
(iii) By contracting with organizations that possess expertise in community development finance, without regard to whether or not the organizations receive or are eligible to receive assistance under this act.
The fund shall not own more than fifty percent (50%) of the equity of a CDFI and shall not control the operations of such institution. The fund shall hold only transferable, nonvoting equity investments in a CDFI. No CDFI shall receive assistance in an amount, which exceeds the greater of ten percent (10%) of the total assets of the fund or Five Hundred Thousand Dollars ($500,000.00).
SECTION 10. (1) A CDFI which files an application and is approved by the fund for financial assistance may use such assistance for the following purposes:
(a) For the development of commercial facilities that promote revitalization, community stability, and the creation or retention of jobs;
(b) For the development or improvement of community facilities;
(c) For the provision of basic financial services;
(d) For housing that is principally affordable to low-income people, except that assistance used to facilitate home ownership shall only be used for services and lending products that:
(i) Serve low income people; and
(ii) Are not provided by other lenders in the area; or complement the services and lending products provided by other lenders in the area;
(e) For businesses that:
(i) Provide jobs for low-income people or are owned by low income people, women, or minority entrepreneurs;
(ii) Enhance the availability of products and services to low-income people; or
(iii) Have loan requests of Twenty-five Thousand Dollars ($25,000.00) or less and have five (5) or fewer employees; or
(f) For other businesses and activities deemed appropriate by the fund.
(2) The fund may also provide technical assistance to any CDFI regardless of whether or not it has received financial assistance from the fund. Monies from the fund may be used for activities that enhance the capacity of a CDFI, such as training of management and other personnel, and development of programs, investment, or loan products.
(3) Any monies designated for the creation of small business investment companies, which are reallocated to the fund shall be used in support of small businesses.
(4) No monies from the fund shall be disbursed for the purposes of subsection (1) or (2) of this section without an equal match from the federal Community Development Financial Institutions Fund (12 USC 4701) or a match from a nongovernmental entity; provided, however, that the fund may approve an application from a CDFI for assistance from the fund before a match has been secured.
SECTION 11. The fund shall submit a report to the Governor, the Speaker of the House and the temporary President of the Senate on or before the first of October, and annually thereafter, describing the financial and technical assistance provided pursuant to this act, including: the number of CDFI applications filed and accepted; the amount and type of assistance provided; a description of projects financed or assisted by fund monies; the number of jobs created or retained through the investment of fund monies; the amount and source of funds leveraged; and such other information as the Mississippi Development Authority may require.
SECTION 12. The Commissioner of Banking and Consumer Finance, in consultation with the Mississippi Development Authority, shall promulgate rules and regulations in accordance with the Mississippi Administrative Procedures Act that are necessary and reasonable for the operation of the fund.
SECTION 13. This act shall take effect and be in force from and after July 1, 2005.